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16

Iran Says It Could Live with $5 Oil Price

Iranian President Mahmoud Ahmadinejad denies IMF views on Iranian economy

The International Monetary Fund (IMF) said in a report in August that if the price of Iranian crude fell to $75 a barrel, Iran would face a current account deficit in the medium term that would be tough to sustain due to its financial isolation.

The oil price is now about $50 per barrel, and Iran is facing declining revenue like other major crude exporters.

Nevertheless, President Mahmoud Ahmadinejad said the oil price fall would have no major impact on the economy of the world's fourth-largest crude producer.

The arguments are the following:
"There was a time when the country managed on $9 a barrel. We can do it even if oil falls to $5," he told reporters at a media fair in Tehran. But Ahmadinejad didn't give detail on how his government would handle such a situation.

Iran is under tightening UN and US sanctions over its refusal to halt sensitive nuclear work the West suspects is aimed at making bombs, a charge Tehran denies.

Earlier this month, when crude still traded at close to $70, a senior central bank official warned that Iran's economy would "face big problems" if the average oil price fell below a level of around $60 a barrel over the next four months.

But Ahmadinejad, who is facing growing criticism at home over his economic management and failure to rein in double-digit inflation, said planned reforms would limit the fall-out.

"Contrary to some opinions... that the drop in the oil price would have a deep impact on Iran's economy, through plans and projects it would almost have no impact... particularly with the government's overhaul that is under way," he said.

He was referring to a government plan to rejig Iran's extensive subsidy system by focusing payments more directly to those in need. Critics say it risks further stoking inflation, which is running at almost 30 percent year-on-year.

The president, who often rails against the West, suggested that Iran's foes would suffer more from the turmoil sweeping the world economy.

Author: Ksenia Kochneva